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“ ‘The market has been a ray of sunshine — basically investors being convinced that we’ll get out of this, and the economy will recover along with earnings… The economy may very well be catching up with the stock market rather than the stock market going off on its own.’ ”
That’s Edward Yardeni, president of Yardeni Research, explaining to CNBC why he believes the historic May jobs report will ultimately be a game-changer for Wall Street.
Read:U.S. regains 2.5 million jobs, unemployment falls to 13.3% as economy starts to recover
In other words, he believes such a massive rebound in the employment number flies in the face of the popular notion that the rally is disconnected from what’s really happening in the economy.
This viral tweet pretty much sums up that disconnect:
“With the benefit of hindsight, [the jobs number] kind of makes sense because we had the Paycheck Protection Program that was basically implemented in April, encouraging small businesses to keep people on their payrolls,” said Yardeni, a longtime Wall Street investment strategist.
He added that, as long as no second wave slams the economy, he sees a V-shaped rebound, at least initially, driving the S&P 500 to record highs over the next couple months. Specifically, he’s looking for the S&P to breach 3,500 sooner rather than later, which is about 300 points higher from here.
“Not too long ago we were in the midst of a terrible meltdown in the stock market. But it turned out to be a 33-day bear market lasting from Feb. 19 to March 23,” Yardeni said. “Ever since then, we’ve had a melt-up that’s all related to the Fed coming in with what I call QE4-ever.”
Friday’s session sure had the look of a melt-up, with the Dow Jones Industrial Average DJIA, +3.15% surging 829 points, while both the S&P 500 SPX, +2.62% and the technology-heavy Nasdaq Composite COMP, +2.06% also logged substantial gains.
“It’s going to be a pretty broad bull market here,” Yardeni said. Watch the full interview:
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